AML/KYC Explained

[freigeist]

Hello everyone, I think this is kind of crazy, that each second project request your personal data, including scans of your docs.
The major idea of cryptocurrency inspired me with its anonymous holding and trading. And I don´t like this tendency, hope in next couple of months everything gonna change, cause I don´t wanna find my personal data somewhere in dark net. What do you think guys, how we can insecure us from KYC ?

The only way to do that is to stop using FIAT money where is not needed.
Stop using bank,  credit/debit card services.
Stop using centralized exchanges (Bittrex, Poloniex etc..) and any other service that asks you for your private personal data.

Decentralized exchanges and other decentralized applications will be the only solution to that problem.

You are right, but people will not do such. Decentralized exchanges are not popular and comfortable in comparison with huge centralized exchanges. It is like FidoNet and Internet ))) ( hope somebody can remember what was actually FidoNet haha)

They are not comfortable for sure right now but as the technology advances so will the the exchanges
and I hope it won't be so long until someone build a decentralized exchange that could be comfortable and easy
to use like the current centralized exchanges.

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[bitbunnny]

KYC shoudn't be compulsory on big exchange like CoinBase, they should allow and add limit to Non-KYC users like Binance has done

This is the users perspective and something we would like to see. We like our personal data to stay anonimous and confidential.
But from exchanges perspective who are under big pressure by different laws and regulations this is impossibe if they want to run legitimate business. Otherwise they risk a lot and that is not in their best interest.

[KRAUSS]

Hello everyone, I think this is kind of crazy, that each second project request your personal data, including scans of your docs.
The major idea of cryptocurrency inspired me with its anonymous holding and trading. And I don´t like this tendency, hope in next couple of months everything gonna change, cause I don´t wanna find my personal data somewhere in dark net. What do you think guys, how we can insecure us from KYC ?

The only way to do that is to stop using FIAT money where is not needed.
Stop using bank,  credit/debit card services.
Stop using centralized exchanges (Bittrex, Poloniex etc..) and any other service that asks you for your private personal data.

Decentralized exchanges and other decentralized applications will be the only solution to that problem.

You are right, but people will not do such. Decentralized exchanges are not popular and comfortable in comparison with huge centralized exchanges. It is like FidoNet and Internet ))) ( hope somebody can remember what was actually FidoNet haha)

They are not comfortable for sure right now but as the technology advances so will the the exchanges
and I hope it won't be so long until someone build a decentralized exchange that could be comfortable and easy
to use like the current centralized exchanges.

I dont belive in somebody who will build  once. We have such exchanges as Binance and Okex and Bitfinex with billions day volume and millions of participants today. And I think those exchanges will be do everything to have the same quoality of busines as long as it is possible...

[Keskitalo77]

KYC shoudn't be compulsory on big exchange like CoinBase, they should allow and add limit to Non-KYC users like Binance has done

This is the users perspective and something we would like to see. We like our personal data to stay anonimous and confidential.
But from exchanges perspective who are under big pressure by different laws and regulations this is impossibe if they want to run legitimate business. Otherwise they risk a lot and that is not in their best interest.

The point is that they don't have to be nearly as invasive as they are. I opened a bank account specifically for buying cryptocurrencies and the bank didn't ask for anything like what the exchanges expect. The exchanges request more information than they need. If the old, stuffy banking institution can comply with KYC without asking where I work and what I plan to do with my money then so can the exchanges.

[O$IRIS]

It appears that AML/KYC are for business-as-usual type of solutions. The true decentralized and open blockchain do not require any of the KYC stuff.

[Knmcrypto]

Notice Binance not on the list of KML compliant exchanges. Makes sense considering recent events.

[TrumpD]

If we being very sincere with ourselves and logical, the KYC/AML request are a necessity in today world, because of the reasons clearly stated. Its a fact that there is terrorism financing, human trafficking and sex slaves, drug dealing etc. If we are good people at heart, I believe that we would like all these stuff to be stopped or eradicated totally, but now cryptos anonymity has only created a big avenue for these things to thrive.

That being said, I don't like my personal data in hands of millions of random people and companies. Already we are suffering from "targeted adverts" to a phones and email, after webiste have promised not to share our personal data. So yea, I can't really trust the KYC/AML words for it. So I guess is a tough one, "universal gain vs. personal gain". A better world with more transparent dealings or a worse world but you (we) the individuals safe in our own small corner - in the end the chaos will reach your doorstep.

What i'd love the most genius cryptographers to come up with is a system where we keep our anonymity, but we can meet the requirements of these KYC/AML to ensure we are not doing illegal stuff... May The Force BE With Them.

[akes2090]

If we being very sincere with ourselves and logical, the KYC/AML request are a necessity in today world, because of the reasons clearly stated. Its a fact that there is terrorism financing, human trafficking and sex slaves, drug dealing etc. If we are good people at heart, I believe that we would like all these stuff to be stopped or eradicated totally, but now cryptos anonymity has only created a big avenue for these things to thrive.

That being said, I don't like my personal data in hands of millions of random people and companies. Already we are suffering from "targeted adverts" to a phones and email, after webiste have promised not to share our personal data. So yea, I can't really trust the KYC/AML words for it. So I guess is a tough one, "universal gain vs. personal gain". A better world with more transparent dealings or a worse world but you (we) the individuals safe in our own small corner - in the end the chaos will reach your doorstep.

What i'd love the most genius cryptographers to come up with is a system where we keep our anonymity, but we can meet the requirements of these KYC/AML to ensure we are not doing illegal stuff... May The Force BE With Them.

I fully agree with you and my experiences relate. I am also trying to roll out an ICO that will make decentralized ID's possible. So in essence you would only need to perform KYC once, and as soon as all checks are done - your documents and the like are deleted, which means there will be no centralized storage of ID or data. If security is breached - intruders will have access to nothing but the blockchain TXs (elaborated on further below) which is futile as it would already be in the public domain. The onus would rest on you though to ensure that your device (PC/tablet/smartphone) is not vulnerable.

* If your (hypothetical) address is: 1234 Crypto Street, Cryptoville, Cryptania
* Your date of birth (derived from ID/SSN or equivalent) is: 01/01/1980

Any other entity that would require KYC should only know that you are from Cryptoville, Cryptania (street address should not be necessary) and that you are 38 years of age - no "specific" info will be divulged. We would simulanteously check if you are on any PEP/terrorist/other crime related lists and have just an atomic value of Yes or No. Once KYC is successful - we issue a cryptographic identity that can be used any other place where KYC is required as we would "vouch" for the legitimacy of your identity. Even further should an entity need to access your profile - they would need to have undergone KYC in the first place, and then you can either accept/reject the access to your info. These requests will be written to a blockchain so that there is transparency and a proper audit trail. This is the jist of the propsed system - I have omitted the complex cryptography and smart contracts behind the concept.

Hopefully the crypto community will see the value behind this venture and support us so that it can be implemented successfully.

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[trademindxofficial]

Thanks - great write-up. Interesting how this applies to token sales rather than exchanges/other services. Exchanges are dealing directly with fiat, so it makes sense for AML/KYC.

In the case of a token sale, surely the seller is basically selling a digital asset that has some future utility? Furthermore tokens are almost always bought with other cryptocurrencies, not fiat, so why does AML/KYC apply to token sales? It seems strange to say that a token is not an investment/security and then apply the kind of controls an investment/security has to it?

If I buy an ebook (digital asset) and even pay with fiat, there are no such checks. So why are these checks being applied to token sales?

[Sir mikolo]

Know Your Customer or (KYC) is a requirement in the process of adhering to the preventitive measures necessary to monitor money laundering techniques used by suspected parties. It involves questions by a banking officer or principal of a firm which allows the officer to ascertain the primary source of funds which are being used to carryout a financial transaction.
The Financial Industry Regulatory Authority (FINRA)
is responsible for making sure all financial firms adhere to the “Bank Secrecy Act.” The Bank Secrecy Act has implementing regulations which amount to “Anti-Money Laundering” (AML) rules. The AML rules are in place to help
protect and report suspicious activity regarding financial transactions. It mainly focuses on those actions which predicate money laundering, terrorist funding, market manipulation and securities fraud.

[Mike1992]

The set of procedures, rules and regulations which are designed with a view to curtail the money laundering or criminal use of the financial institutions is called Anti Money laundering process. Many measures are developed across the globe to curtail money laundering and combating terrorist financing. While KYC is one of a anti money laundering procedure or a small part of AML and Combating Financing terrorism (CFT).

[Shafiqul Islam]

AML/KYC is a barrier to entry for small Bitcoin startups and effectively hinders Bitcoin innovation .. it should be IGNORED

KYC means know your consuser.it is a effective way of getting tokens or coins. Kyc is an anti Cheater activities in AIRDROP and bounties.

[NotVitalik]

This is all amazing guys but why KYC/AML is still so centralized? I mean common, blockchain is used everywhere and still we have to send over Internet our passports, driving licenses, utility bills, etc. Any ideas how to  get around it? There must a company to offer decentralized KYC services.

[Schmutzfrosch]

This is all amazing guys but why KYC/AML is still so centralized? I mean common, blockchain is used everywhere and still we have to send over Internet our passports, driving licenses, utility bills, etc. Any ideas how to  get around it? There must a company to offer decentralized KYC services.

Ya, Selfkey is building decentralized platform to do KYC/ID without a need to send your docs over the network.

[szulczuk]

The subject is really interesting, but I think it should improve some aspects, or possibly they are not very well explained and people like me do not understand well because we do not live in an environment where that is imagined feasible.

[bitbunnny]

This is all amazing guys but why KYC/AML is still so centralized? I mean common, blockchain is used everywhere and still we have to send over Internet our passports, driving licenses, utility bills, etc. Any ideas how to  get around it? There must a company to offer decentralized KYC services.

Nope, this wouldn't function. Not from the personal data protection perspective, at least not in Europe.
These are all your personal data and they can't be shared and distributed without your explicite consent and used for exactly defined purpose. The regulation is rather strict concerning that issue.

[freigeist]

This is all amazing guys but why KYC/AML is still so centralized? I mean common, blockchain is used everywhere and still we have to send over Internet our passports, driving licenses, utility bills, etc. Any ideas how to  get around it? There must a company to offer decentralized KYC services.

Nope, this wouldn't function. Not from the personal data protection perspective, at least not in Europe.
These are all your personal data and they can't be shared and distributed without your explicite consent and used for exactly defined purpose. The regulation is rather strict concerning that issue.

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https://www.icopass.id/

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[pissyas]

What is KYC ?

Know your customer (KYC) refers to due diligence activities that financial institutions and other regulated companies must perform to ascertain relevant information from their clients for the purpose of doing business with them. The term is also used to refer to the bank regulation which governs these activities. Know Your Customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents', consultants' or distributors' anti-bribery compliance. Banks, insurers and export credit agencies are increasingly demanding that customers provide detailed anti-corruption due diligence information, to verify their probity and integrity.


Who has to enforce KYC ?

Know your customer (KYC) falls under the responsability of each financial institution and/or regulated company.

The regulations require these entities to adopt KYC procedures.  It assists them in knowing / understanding the customers and their financial dealings better to monitor their transactions for identification and prevention of suspicious transactions.


KYC Recommendations

KYC controls typically include the following:

- Collection and analysis of basic identity information (referred to in US regulations and practice a "Customer Identification Program" or CIP)
- Name matching against lists of known parties (such as "politically exposed person" or PEP)
- Determination of the customer's risk in terms of propensity to commit money laundering, terrorist finance, or identity theft
- Creation of an expectation of a customer's transactional behavior
- Monitoring of a customer's transactions against their expected behaviour and recorded profile as well as that of the customer's peers

KYC Jurisdiction and Locality

KYC regulations are local, and differ from country to country. Jurisdiction is also, on a coutry to country basis.

To know more about your specific country, visit: http://kycmap.com


KYC and Bitcoin Exchanges

Stricter KYC policies:

Bitstamp   https://www.bitstamp.net/privacy-policy/
Bitfinex       https://www.bitfinex.com/pages/tos  or refer inquiries to compliance@bitfinex.com
BTCChina   (only since new PBOC guidance, Dec 2013) (link?)
Cavirtex   https://www.cavirtex.com/faq
Coinbase    https://coinbase.com/legal/privacy
Kraken       https://www.kraken.com/legal/verification (their General Counsel, Constance Choi is a well known specialist in the Regulatory and Compliance field)
Cryptonit    https://cryptonit.net/regulations


Loose or non-existant KYC policies:

BTC-e   (??)
Crypsty   (??)
LocalBitcoin (p2p based, limited KYC?)



What is AML?

Standing for "Anti-money Laundering", it is a set of procedures, laws or regulations designed to stop the practice of generating income through illegal actions. In most cases money launderers hide their actions through a series of steps that make it look like money coming from illegal or unethical sources was earned legitimately.

Who has to enforce AML?

In response to mounting concern over money laundering, the Financial Action Task Force on Money Laundering (FATF) was established by the G-7 Summit that was held in Paris in 1989.

The Task Force was given the responsibility of examining money laundering techniques and trends, reviewing the action which had already been taken at a national or international level, and setting out the measures that still needed to be taken to combat money laundering. In April 1990, less than one year after its creation, the FATF issued a report containing a set of Forty Recommendations, which provide a comprehensive plan of action needed to fight against money laundering.

The FATF calls upon all countries to take the necessary steps to bring their national systems for combating money laundering and terrorism financing into compliance with the new FATF Recommendations, and to effectively implement these measures.

Again, as in the case of KYC, financial institutions and/or regulated companies are responsible for the implementation of internal AML policies.

AML Jurisdiction and Locality

AML regulations are also local, and differ from country to country. Some countries choose a top-down approach, inheriting much of their AML policies from the FATF, while others go for a bottom-up approach and then have to reconcile both policies. Extreme countries where such reconciliation is impossible (generally due to Government unwillingness) are excluded from the FATF membership, with the corollary of increased complications to access the international markets and financing.

For a full list of FATF members, visit:         http://en.wikipedia.org/wiki/Financial_Action_Task_Force_on_Money_Laundering

AML and Bitcoin Exchanges

Currently in compliance:

Bitstamp   https://www.bitstamp.net/aml-policy/
Bitfinex      https://www.bitfinex.com/pages/tos or refer inquiries to compliance@bitfinex.com
Cavirtex   https://www.cavirtex.com/why_virtex#proactively_working
Coinbase    https://coinbase.com/legal/privacy
Kraken       https://www.kraken.com/legal/aml (their General Counsel, Constance Choi is a well known specialist in the Regulatory and Compliance field)
Cryptonit    https://cryptonit.net/regulations

Unknown status:

BTCChina   (unclear since new PBOC guidance, Dec 2013) (are they financial institutions?)
BTC-e   https://btc-e.com/page/1
LocalBitcoin (p2p based, limited or no AML?)


WARNING:
Assume that restrictions for any Bitcoin to National Currency exchange may become more restrictive at any time in the future. Many exchanges in the past have restricted currency deposits or withdrawals proactively as BitStamp has, without any explicit order from a government agency to do so at the time. Others like BTCChina have in response to concerns made even the ability to continue to login to their platform contingent on supplying further identifying information. In the past surprise changes to AML/KYC requirements have lead users of exchanges to have their access to deposited funds substantially delayed while complying with new requirements or even lost access to their deposited funds completely if they could not comply with the new requirements. Changing AML/KYC exchange enacted AML/KYC requirements have affected users of all major exchanges that handle both Bitcoin and National currency. People who continue using such exchanges should prepare for the contingency that their exchange of choice will change their AML/KYC requirements in the future.

We can see that the ICO projects in 2017 are very well developed and have very successful projects such as brilliant REC, HXT, CMT ... These are all outstanding projects. But in addition to those projects, there are also many failed projects and can not call for capital success. Now, the market has developed and requires buyers and sellers to implement KYC so that they can improve their credibility and verification of their projects, avoid virtual registrations. virtual bridge.